The Office of Consumer Financial Protection draws a line in the sand for the mortgage services industry with new direction and proposed revisions to its mortgage loan management rules. The CFPB expects the impending expiration of federal foreclosure and forbearance protections for mortgage creditors will increase the risk of harm to borrowers and produce a wave of foreclosures. In a flurry of activity from March to early May, the Bureau put an end to any hope of leniency towards mortgage managers, as the industry continues to grapple with the complex mosaic of federal, state and federal rules and guidelines. intended for investors to work with the borrowers concerned. CFPB’s overall message is clear: For mortgage managers, non-compliance is not an option.
In particular, the Bureau noted the planned expiration of state and federal foreclosure moratoria and forbearance protections and a corresponding influx of borrowers at risk of foreclosure, and expressed concern that managers may not communicate options effectively. mitigation of losses to borrowers, especially minorities and high-risk populations. Apparently as a response to its own concerns, the CFPB proposed revisions to Regulation X that would establish pandemic-specific early intervention and loss mitigation procedures and prohibit foreclosure referrals until the end of the year. 2021. At the same time, the Bureau also rescinded seven policy statements providing Covid-19 regulatory flexibility.
The CFPB published two key reports in May. The first report found that black and Hispanic borrowers are much more likely to be abstinent or past due on their loans than other borrowers, and therefore may result in an increase in the Bureau’s fair loan and service efforts. The second report – a “complaint bulletin” – noted that the CFPB has received the highest volume of monthly mortgage complaints since 2018, with an apparent focus on managers’ failure to provide adequate information regarding loss mitigation as well. as delays and refusals of loan modifications.
Taken together, these actions clearly indicate that the CFPB will prioritize mortgage servicing in the coming months. As you read this guide, duty officers should consider the following areas and what they can do to prepare for the office action:
Early intervention. In addition to the current timing and staffing requirements in Regulation X, the CFPB has incorporated additional early intervention requirements into its proposed rule and has indicated that it expects managers to communicate proactively with borrowers before the expiration of any forbearance period. Even if the proposed rule is not promulgated, it provides valuable insight into the expectations of the office, and managers should take this into account when evaluating their early intervention programs and whether they can take additional steps to help. borrowers in difficulty.
Loss mitigation assessments. The CFPB will also review the managers’ ability to assess loss mitigation requests in a timely manner, and whether a borrower does not qualify for loss mitigation, whether the managers are complying with foreclosure restrictions in Regulation X – as well as other federal and state laws. In response to these concerns, managing officers should ensure that they have adequate staff to handle an expected increase in loss mitigation requests and should closely monitor developments in federal and state foreclosure moratoria. .
Contact continuity and content. The Bureau has indicated that it will focus on its own contact continuity requirements and whether borrowers are provided with accurate information on loss mitigation options. Service agents should reassess the staffing of their call centers and train their employees on all existing and new forbearance / loss mitigation programs. The CFPB has specifically indicated that it will judge the performance of service agents by comparing their “hold times” to industry standards.
Discrimination. The pandemic has had a disproportionate effect on communities with limited English proficiency, part of CFPB’s continued focus on LEP borrowers. Additionally, the Bureau will enforce the Equal Credit Opportunity Act ban on discrimination based on source of income – a potential complication as Covid-19 relief programs involve increased payments of unemployment and direct subsidies to borrowers. Officers should ensure they have the resources to assist LEP borrowers and review their income qualification guidelines in light of changes to government benefits.
As we have seen in the aftermath of the Great Recession, we expect the CFPB to aggressively undertake its own enforcement actions in this space and partner with state attorneys general when foreclosure restrictions apply. States are involved. We also expect the CFPB to generously use its UDAAP authority to deal with acts and omissions of agents that the Bureau considers to be violations of the CARES Act or investor requirements, particularly where Regulation X may not apply. apply.
CFPB missives are an early and unmistakable warning that the era of Covid-19 flexibility is over. The positive news, if any, is that the CFPB is giving notice now – before the perceived wave of loss mitigation and foreclosure activity hits – so managers can redouble their efforts over the past 12 years. months and continue to meet the anticipated needs of borrowers in an efficient manner. navigate the CFPB in-depth review.